Trinity Mirror chief executive Sly Bailey points out that newspapers are not enjoying boost in advertising seen in TV market. Photograph: David Sillitoe for the Guardian

Trinity Mirror's share price plummeted by more than 20% on Thursday after the Daily Mirror publisher admitted a "slow and volatile" recovery meant costs from inflation, investment and surging newsprint prices would outstrip savings planned this year.

The company reported a tripling in pre-tax profits for 2010, but the gloomy outlook was compounded by a tough start to this year with total advertising revenues down by 10% in January – excluding the impact of GMG Regional Media to give a true year-on-year view. The national newspaper division fell 9% and the regional operation was down 11%.

Trinity Mirror has maintained and even increased profitability in recent years through a programme of aggressive cost-cutting. In 2010 the company beat its own guidance and slashed £65m from operating costs, with reported profits rising from £42m to £123m.

However, the City reacted to the company admitting that the £10m cuts identified this year will not be enough to offset extra costs by wiping 21% off the share price, which was down to 66.25p by 11.30am.

"These [cuts] will be more than offset by general inflationary price increases, average increase in newsprint prices in excess of 20% and investment in our businesses," the company said.

Sly Bailey, Trinity Mirror chief executive, pointed out that the newspaper market is not enjoying the boost seen in television advertising, as typified by ITV's market-pleasing annual results reported on Wednesday, with 19 categories of advertiser spending less year on year in January compared with just three on TV.

Bailey said that while Trinity Mirror was holding its share of the market versus rivals the national division had been hammered by the loss of government advertising, which had dropped from about £1m to just £100,000 year on year in January.

There was also a "slow start" from the major supermarkets. In the regional division private sector spending has not "taken up the slack" of public sector cuts.

"We expect a slow and volatile recovery in the UK," said Bailey. "The 2011 ad market will be a bit of a bumpy ride."

Overall Trinity Mirror reported that total revenue fell only slightly to £761m in 2010. The total revenue figures are flattered by £51m in revenue from GMG Regional Media, which the company acquired in March last year, but adversely impacted by £9.9m due to an extra week trading in 2009.

Stripping out these factors Trinity Mirror reported a year-on-year fall in revenue of about 6.9%. Within this, again after stripping out the GMG acquisition, ad revenue fell 6.3% and circulation revenue declined 8.6%.

However, Trinity Mirror pointed out that this is "clear evidence" of an improvement in the market given that in 2009 total revenues were down 12.4%.

The company managed to improve operating profits at its national newspaper division by 3% to £86.1m, with total revenue down 6.5% to £430m. Within this, ad revenue fell 3.1% and circulation revenue dropped 8.5%.

Trinity Mirror's regional operation saw operating profits grow by an impressive 28% year on year to £51.7m, excluding the effect of the GMG Regional Media acquisition, with total revenue down 7.5% to £331m. Within this ad revenue fell 8.4% and circulation revenues dropped 9%.

The gloomy outlook overtook the work done paying down debt levels by £58.1m to £265.9m and a "material" reduction in the pension deficit by £135m to £161m.

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